Today virtually every major retailer maintains some sort of Internet presence, typically in the form of a website, and most include an “online” product purchasing capability for conducting electronic commerce. In addition, the Internet has provided smaller retailers an opportunity to sell products into a wide range of markets, and to broadly dispersed customer bases, without incurring the significant overhead of a “brick and mortar” infrastructure. Finally, the introduction of auction websites has provided virtually anyone with an opportunity to conduct electronic commerce with a minimal investment of time and/or money.
As was the case with traditional retail sales, many sellers conducting electronic commerce offer discounts through their website. As was the case in traditional retail sales, in many instances, discounts are offered on a particular product based on the sellers need to reduce, or eliminate, the product from inventory in light of one of numerous possible business considerations including seasonal considerations, discontinued lines of products, warehousing issues, or any one of various reasons that can motivate a seller to offer discounts on a particular product in order to reduce, or eliminate, the product inventory.
Of course, as was the case in the traditional retail market, a seller wishing to reduce or eliminate a product inventory still wishes to obtain the highest possible purchase price for that product. However, the seller must balance his or her need to reduce the inventory of the product, and the threat of being forced to warehouse a large inventory of the product indefinitely, with the desire to obtain the highest possible price. Using current electronic commerce systems, a seller typically chooses a relatively static discount price for the product, often based on the seller's cost and, in some instances, on market research. The seller then lists, or displays, the product on the seller website at the determined static discount purchase price. Then, using current methods, the seller typically waits to see if the product sells at the discounted price, and the seller is thereby typically subjected to considerable stress and second guessing. This is because, if the product sells quickly, the seller must wonder if he or she discounted the purchase price of the product too aggressively, and therefore forfeited potential profits. On the other hand, if the product does not sell quickly, the seller typically holds out as long as his or her nerves can take, and then, all too often, does statically discount the price too aggressively in order to ensure the product sells in an action driven, more or less, by panic. Consequently, using current electronic-commerce methods and systems, it is very difficult for the seller to find the optimum discount that allows the seller to reduce, or eliminate, his or her inventory of a product while at the same time obtaining the maximum purchase price the market will bear.
Likewise, despite an auction website's potential to find the highest price the market will bear by unleashing raw market forces, auction websites present similar problems determining and/or obtaining the highest product purchase price. Using a typical current auction website, a seller lists a product on the auction website at an initial purchase price, which in many cases is zero, but in other cases is some minimal value established by the seller. Using a typical current auction website, the product remains listed on the website for a specified period of time and potential buyers are given the opportunity to bid on the item in classic auction style. Then, using a typical auction website, the highest bidder at the end of the specified period of time wins the auction and the right to purchase the product at that highest bid price.
While, the auction website process described above appears to be driven by the purest of market forces, and therefore appears to have the best potential for obtaining the highest purchase price for a product, in many instances the eventual price paid by the highest bidder is less than what the seller considers satisfactory, and is often significantly less than what the market actually would bear. This is because, unlike classic auctions, auctions conducted on an auction website typically include the artificial time limit discussed above and all the potential buyers are typically aware of the auction time limit. Consequently, unlike traditional auctions, auctions websites, with theses artificial time limits on the product listings, are susceptible to last minute “low balling” strategies that have evolved along with the auction website market. One of these strategies includes a potential buyer, and/or buyers, holding off on aggressively bidding on a product until the last few minutes, and often seconds, of the auction time limit. Then the buyers submit bids that are a trivial amount higher than the highest existing bid. As more and more potential buyers have begun to practice this style of bidding, many auctions actually run as intended, i.e., competitively, for only the last few seconds of the auction and it is the time limit set for the listing, not the market value of the product, that determines the sale price. i.e., the buyer who submits the last trivial increase before the cut off time wins. Consequently, more and more sellers have found themselves making sales of products at purchase prices far below what the market would actually bear absent these “lowball” bidding strategies.
Some auction websites allow a seller to offer a “buy it now” purchase price which, if selected by a potential buyer, bypasses the auction process and gives the potential buyer the opportunity to purchase the product immediately at the “buy it now” price. However, when deciding a “buy it now” price, sellers using current auction websites are in a similar dilemma to the electronic commerce retail sellers trying to set a discount price discussed above, in that, if the “buy it now price” is set too high, potential buyers, especially those potential buyers not interested in monitoring the auction website for extended periods of time, will simply not purchase the product and, electronically, walk away. Then the product purchase price becomes susceptible to the lowball bidding discussed above. On the other hand, if the “buy it now” price is too low, the seller is never provided the opportunity to receive the true highest purchase price the market will bear.